Encana Analyst Coverage and Price Target

Encana Corporation (NYSE: ECA) is an energy producer that is focused on developing its multi-basin portfolio of natural gas, oil and natural gas liquids producing plays. The Company’s operations also include the marketing of natural gas, oil and NGLs.

The company has been offloading its natural gas assets to improve the overall health of its balance sheet amid constrained liquidity and financial flexibility situations. It recently announced that that its wholly owned subsidiary, Encana Oil & Gas (USA) Inc., has completed the previously announced sale of its Piceance natural gas assets, located in northwestern Colorado, to Denver-based Caerus Oil and Gas LLC (Caerus).

From a business & financial performance point of view, the company’s margins are improving, production is back on growth trajectory, innovation is coming fast and the balance sheet is strengthening as well. In fact, Encana is outperforming its initial 2017 corporate guidance, reflecting its efficiency. The company is maintaining its original capital investment guidance range while lowering expected costs and increasing expected production growth from its core assets from the fourth quarter of 2016 to the fourth quarter of 2017 to between 25 to 30 percent.

Last month Encana reported robust set of numbers for Q2. Revenues tripled compared to the similar period last year. Earnings surged to $331 million, which was a significant improvement against $601 million of loss that the company suffered a year earlier. As per management, ECA is gradually improving corporate margin, driven by a balanced production mix, strong oil and condensate growth and lower costs. In fact, for the third consecutive year, it has significantly strengthened its balance sheet.

Also, from a risk management perspective, the company hedges itself from volatile price movements by entering into derivative transactions. As per management, over three-quarters of ECA’s production are hedged due its prudent risk-management strategies. The combination of innovative operations, commercial ingenuity, and preserving optionality is enabling ECA to create value even at subdued oil prices.

Driven by management team’s recent efforts, which are slowly starting to pay off and potential tailwind of the improving U.S. oil inventory issue; ECA’s updated guidance reflects its strong performance, efficiency and confidence. ECA is generating significant momentum and is well positioned for 2018.

With the recent developments, analysts have revised their outlook on the stock: The stock currently has an average rating of “BUY” and a consensus price target of $16.35. Considering present valuation, ECA is at an extremely favorable risk reward position.

About the Company: Encana is a leading North American energy producer that is focused on developing its strong portfolio of resource plays, held directly and indirectly through its subsidiaries, producing oil, natural gas liquids (NGLs) and natural gas. By partnering with employees, community organizations and other businesses, Encana contributes to the strength and sustainability of the communities where it operates. Encana common shares trade on the Toronto and New York stock exchanges under the symbol ECA.

Outlook About the industry:

Crude prices over the near term is expected to reflect a sideways-to-bullish trend and remain range bound between $45-$55 per barrel. Even as North American shale supply remains robust, oil will be supported by the continued strengthening of global oil markets through OPEC constrained production and improving global demand situation.

Overall, oil prices in 2017 are expected to be relatively higher than 2016 levels. That said, it would remain significantly lower than $100-per-barrel levels at which oil traded prior to the commodities slump that started in July 2014.

Long-term fundamentals for Natural Gas continue to be bullish due to structural imbalances. While domestic natural gas production is expected to improve this year, higher use of liquefied natural gas (or LNG), booming exports to Mexico, replacing coal-fired power plants and higher demand from industrial projects will likely support increased output. This all put together would lead to price eventually settling above $3.

The industry currently has a trailing 12-month EV/EBITDA ratio of 6.89, which is lower than the median value of 8.62 over the past year.

Highlights of 2017’ performance:

Encana continues to successfully manage inflation as it efficiently develops its core assets at scale. Through sophisticated planning, supply chain management and operating efficiencies, the company expects to hold like-for-like drilling and completion costs essentially flat year-over-year. On a per unit basis, combined second quarter operating costs (excluding long-term incentives) and transportation and processing costs were down $0.34 per BOE compared to the first quarter of 2017.

Operational improvements and productivity gains across the portfolio through the first half of 2017 strengthened Encana’s resiliency. The company now expects it can deliver its five-year growth plan, announced in October 2016, in a flat $50 WTI oil price environment. For the third consecutive year, Encana expects to significantly strengthen its balance sheet. The sale of its Piceance assets is expected to close in the third quarter of 2017. Transaction proceeds plus cash flow from anticipated strong operating performance means that by year-end 2017, Encana expects its net debt to adjusted EBITDA ratio will be approximately two times and that it will have total liquidity of over $5 billion. Encana has no debt maturities until 2019 and almost 75 percent of its long-term debt is not due until 2030 and beyond.

For 2018, the company has hedged approximately 31,000 bbls/d of expected oil and condensate production at an average price of $55.45 per bbl and approximately 650 MMcf/d of expected natural gas production at an average price of $3.07 per Mcf.

On July 20, 2017, the Board declared a dividend of $0.015 per share payable on September 29, 2017 to common shareholders of record as of September 15, 2017

2nd Quarter 2017 Financial Results:

Net earnings of $331 million compared to a loss of $601 million in the second quarter of 2016.

Cash from operating activities of $218 million and non-GAAP cash flow of $351 million, up 26 percent from the previous quarter

Core asset production of 246,500 barrels of oil equivalent per day (BOE/d), up 9,200 BOE/d from the previous quarter; Encana now expects its core assets will deliver 25 to 30 percent production growth from the fourth quarter of 2016 to the fourth quarter of 2017

Liquids production of 124,900 barrels per day (bbls/d), including oil and condensate production of 100,200 bbls/d, up 14 percent from the previous quarter

Increased well productivity across its core assets and grew its premium return well inventory to over 11,000 locations

By year-end 2017, Encana expects its net debt to adjusted EBITDA ratio will be approximately two times and that it will have total liquidity of over $5 billion

Key risk factors and potential stock drivers:

The company is exposed to credit risk. Substantial portions of the Company’s accounts receivable is with customers in the oil and gas industry and are subject to industry credit risks.

The oil and gas industry is cyclical and commodity prices are inherently volatile. Oil prices during 2017 are expected to reflect global supply and demand dynamics as well as the geopolitical environment. In addition, rapid increases in U.S. crude oil production or the continuation of elevated levels of U.S. oil storage inventories could also negatively impact prices. The company’s business risk profile will remain vulnerable to the fluctuations in the underlying commodity prices.

The company’s ability to ramp-up profitability while sustaining its revenue growth would be one of the key stock driver over the near to medium term.

Stock Chart:

On Friday, August 11th, 2017, ECA is trading at $9.69 (up 1.36%) on an average volume of 13.23 million shares exchanging hands. Market capitalization is $9.57 billion. The current RSI is 50.85

In the past 52 weeks, shares of ECA have traded as low as $8.10 and as high as $13.85.

At $9.69, shares of ECA are trading above its 50-day moving average (MA) at $9.28 and below its 200-day MA at $11.00

The present support and resistance levels for the stock are at $9.53 & $9.83 respectively.

***Get our small cap profiles, special situation and watch alerts in real time. We are now offering our VIP – SMS/text alert service for free, simply text the word “Traders” to the phone number “25827” from your cell phone***

Traders News Source has not been compensated for this report by anyone and the opinions if any are that of the author Vikas Agrawal, CFA. Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I, wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.

This web site, published by TNS LLC, and is an investment newsletter that is built on the premise of assisting individual investors in learning about investing. Our goal as publishers of financial information is to provide research and analysis of investments to our subscribers. TNS LLC does not give buy or sell recommendations. We do purchase distribution rights from analyst, financial writers and bloggers for a fee that may be licensed to issue price targets and recommendations. Furthermore, we encourage you to speak to a licensed professional prior to making an investment in any type of publicly traded security.

We do sell advertising to other companies including brokerage firms, web sites, publicly traded issuers, investor relations firms, and investment publications, among others. TNS LLC makes no warranty as to the policies of these organizations, and in no way endorses their offers, services, or the content of their advertisements.

When an advertiser is a publicly traded company or a third party acting on behalf of a public company, we fully disclose all compensation in the email advertisement. Such disclosure is included in a disclosure statement in each of the advertisements sent via email.

17B Disclosure

Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The disclaimer is to be read and fully understood before using our services, joining our site or our email/blog list as well as any social networking platforms we may use.

PLEASE NOTE WELL: TNS LLC and its employees are not a Registered Investment Advisor, Broker Dealer or a member of any association for other research providers in any jurisdiction whatsoever.

Release of Liability: Through use of this website viewing or using you agree to hold TNS LLC, its operator’s owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. TNS LLC encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled, or is available from public sources and TNS LLC makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. None of the materials or advertisements herein constitute offers or solicitations to purchase or sell securities of the companies profiled herein and any decision to invest in any such company or other financial decisions should not be made based upon the information provide herein. Instead TNS LLC strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D.

TNS LLC is compliant with the Can Spam Act of 2003. TNS LLC does not offer such advice or analysis, and TNS LLC further urges you to consult your own independent tax, business, financial and investment advisors. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor’s investment may be lost or impaired due to the speculative nature of the companies profiled.

The Private Securities Litigation Reform Act of 1995 provides investors a ‘safe harbor’ in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be “forward looking statements”. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as “projects”, “foresee”, “expects”, “will”, “anticipates”, “estimates”, “believes”, “understands”, or that by statements indicating certain actions & quote; “may”, “could”, or “might” occur.

Understand there is no guarantee past performance will be indicative of future results. In preparing this publication, TNS LLC has relied upon information supplied by its customers, publicly available information and press releases which it believes to be reliable; however, such reliability cannot be guaranteed. Investors should not rely on the information contained in this website. Rather, investors should use the information contained in this website as a starting point for doing additional independent research on the featured companies. The advertisements in this website are believed to be reliable, however, TNS LLC and its owners, affiliates, subsidiaries, officers, directors, representatives and agents disclaim any liability as to the completeness or accuracy of the information contained in any advertisement and for any omissions of materials facts from such advertisement. TNS LLC is not responsible for any claims made by the companies advertised herein, nor is TNS LLC responsible for any other promotional firm, its program or its structure.

About Us

Created for active traders, Traders News Source is dedicated to being your number one source of breaking market news. Not only do we bring you top stories in key sectors, we give you well-researched expert reviews of specific opportunities in hot sectors like biotech, energy, new technology and more.